I find Ben Thompson engaging reading. In one of his best posts, he discusses how AWS has a best, first customer, Amazon. Every service that AWS builds has an automatic flagship customer that will stress test the application.
The cost to build AWS was justified because the first and best customer is Amazon’s e-commerce business
I really enjoyed that and have been looking around other places where you can see this same pattern. 8z Real Estate, a brokerage for which I used to work, has a social media offering, zavvie, which I believe all 8z brokers are using. One of the kitchens that use The Food Corridor has an affiliated restaurant that uses a large amount of kitchen time. Would love to hear of other examples.
All of these companies have been able to make substantial investments in infrastructure knowing that, if nothing else, the benefits will accrue to a business with the same owners. But at the same time the subsidiary can benefit from learning from other businesses, thought benefits flow both ways. If other real estate brokerages use zavvie in different ways, zavvie can incorporate those lessons into the software and then 8z brokers will benefit. If that restaurant needs a special piece of equipment, the kitchen can buy it, and all other clients of the kitchen will have access to it.
Do competitors have concerns about helping the parent business, even in a roundabout manner? Sure. Here’s an article about how startups should be wary of being co-opted by AWS. The brokerages that are using zavvie have to be aware of the parent company (or, perhaps to be precise, that the owners of zavvie and the owners of 8z are the same). However, if the subsidiary company can offer a service that is unique and/or very price competitive, that may cause competitors of the parent company to ignore their concerns, at least for the time bieng.
Once you get to a certain size of business, building an affiliated business which can serve both the original business and other competitors can be a great business model. You can gain the benefits of marketplace intelligence along with providing the subsidiary business enough runway to survive.